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The Impact of Fiscal Policy toward Economic Performance and Poverty Rate in Indonesia

Author

Listed:
  • Indra Maipita

    (Universitas Negeri Medan)

  • Mohd. Dan Jantan

    (Universiti Utara Malaysia)

  • Nor Azam Abdul Razak

    (Universiti Utara Malaysia)

Abstract

The government is continuously formulating some policies in order to boast economic growth and downsize poverty rate. However, the government is facing some obstacles such as an increasingly in budget deficit which is potentially impacting to the determining of priority scale as well as the pro and contra within it. Based on that consideration, economic policy is needed to be revised and redesigned in order to meet the need of pro growth, pro job, and pro poor. Generally, this research aims to examine the impact of an expansion and contraction of fiscal policy measures on Indonesia economic performance. For the purpose of this study, the change of macro economic indicators, economic sector performance, and the change of poverty and income distribution are examined using the Computable General Equilibrium (CGE) model. In order to evaluate the disparity of income distribution, beta distribution function is used which is adopted from Decaluwe, et al. (1999). This study employs Foster, Greer, and Thorbecke (F-G-T) and Cockburn (2001) methods to evaluate poverty (poverty incidence) on each household group. The results of this study show that the impact of an increase in subsidy is more favourable than two others fiscal policy measures. Even though the policy of transfer income gives a positive impact for the upsizing of rural household income and the downsizing in poverty, but on the other hand it has negative impact on others household income which aggregately has a negative impact on the decreasing of GDP.

Suggested Citation

  • Indra Maipita & Mohd. Dan Jantan & Nor Azam Abdul Razak, 2010. "The Impact of Fiscal Policy toward Economic Performance and Poverty Rate in Indonesia," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 12(4), pages 1-34, April.
    • Handle: RePEc:idn:journl:v:12:y:2010:i:4:p:1-34
    DOI: https://doi.org/10.21098/bemp.v12i4.378
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    Citations

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    Cited by:

    1. Yaru, Mohammed Aminu & Adisa-Ohiaka, Ubaydah, 2022. "Indirect Taxation and Poverty in Sub-Saharan Africa: An Empirical Evidence from Panel Data Analysis," African Journal of Economic Review, African Journal of Economic Review, vol. 10(5), December.
    2. Herbert W. V. Hasudungan & Sulthon S. Sabaruddin, 2016. "The Impact of Fiscal Reform on Indonesian Macroeconomy: A CGE Framework," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 8(3), pages 181-202, September.
    3. Akram, Vaseem & Rath, Badri Narayan, 2020. "What do we know about fiscal sustainability across Indian states?," Economic Modelling, Elsevier, vol. 87(C), pages 307-321.
    4. Fitrawaty, & Maipita, Indra & Hermawan, Wawan & Rahman, Haikal, 2018. "The Impact of Middle-Class towards Economic Growth and Income Inequality in Indonesia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(3), pages 3-16.
    5. Akram, Vaseem & Rath, Badri Narayan, 2020. "Optimum government size and economic growth in case of Indian states: Evidence from panel threshold model," Economic Modelling, Elsevier, vol. 88(C), pages 151-162.

    More about this item

    Keywords

    Kebijakan Fiskal; kemiskinan; distribusi pendapatan;
    All these keywords.

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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